The Dominion TUESDAY, AUGUST 3, 1920. THE NATIONAL FINANCES

Dominion, Volume 13, Issue 265, 3 August 1920, Page 4

The Dominion TUESDAY, AUGUST 3, 1920. THE NATIONAL FINANCES

In more than one respect, the problems to which Parliament is called upon to address itself in the Financial Debate which is to open to-day arc of unexampled difficulty. An idea of the nature and magnitude of these problems is "perhaps gained most easily by contrasting tho developments of national finance during the last six years and in the six normal years up to the end of 1913-14. Tho increases .respe'e lively in revenue, expenditure, and population in each six-year period -ire set out in the following table: — Increase 190S-11. 19M-20. in £ £ Revenue 3,165,672 13.851,679 31.9 per cent. 113.2 percent. Expenditure . 3,011,899 11,95G,0G0 43.9 percent. 101.1 per cent. Population ... ' 135,352 78,145 14 per cent. 7.lper-cenv. A. compact demonstration is here afforded of the enormously enhanced •■ate at which the financial obligations of the Dominion have expanded during the last six years in comparison with the corresponding increase in the six years preceding tho outbreak of war. In 1914 expenditure was greater by 43.9 per cent, than in 1908, but in 1919-20 the expenditure of 1914 was more than doubled. The burdens thus imposed aro all the heavier in view i of the check imposed by the war on growth of population. As yet the great increase in .expenditure since 1914 is moro than covered by increased revenue, but it is moro important that during the last year or two, in spite of the high scalo of taxation, expenditure has been expanding much faster than reveihie. Tho rate- at which tho margin of revenue over expenditure is being cut down is indicated in the next table:— Revenue. Expenditure. Increase in X X 1919 over 191S 2,116,150 3,553,311 10.6 per ccnt. 23.5 per cent. 1920 over 1919 3,728,968 5,108,325 16.6 per ceut. 27.3 per cent. 1921 over 1920 (estimated) 1,631,360 3,111,573 6.2 percent. 13.2 percent. The aggregate, increase in expenditure during the last two financial years was £8,661,036; the aggregate increase in revenue in ' the same period was £5,875,118, or £2,786,518 less. Obviously to proceed a little further on these lines would be to produce a balance on the wrong side of the account. The position will be made worse than it is at present if tho Finance Minister's anticipations of revenue and expenditure for the current year are closely realised. No doubt, however, he has adhered to customary practice in considerably under-estimating his revenue, and if sound economy is exercised the result of this _ year's operations may be to stabilise tlio national -finances in their present shape—that is to say, with a substantial balance of revenue over expenditure. The figures as they stand, however, emphasise the necessity of keeping a close watch on expenditure and limiting it to really useful and neccssary objects. It may bo aligned with some force that the total obligations incurred by the Dominion are made to appear greater than they really are by the prevailing inflation of money, but this consideration does not affect in the slightest degree the absolute necessity of setting bounds to expenditure and maintaining a safe margin of revenue. It of course adds seriously to the difficulties of the Finance Minister that some heavy additional calls now made upon national revenue are quite beyond his control. In particular the net public debt of the" Dominion has been more than doubled since the outbreak of war, and tho annual charges for interest and ■ sinking fund naturally have increased in full proportion. It is a striking fact that on a jier capita, basis these annual debt charges now considerably exceed the taxation per head levied in the Dominion in 1914. As showing how the financial 1 burdens of the Dominion have been increased by necessary borrowing for war purposes, the following table Bpcaks for itself: Interest and Sinking Fund Charges. Average per head per annum. £ s. d. 1908 2 5 fi 1914 2 12 0 1920 6 3 6 Any idea that such increases in expenditure, and such a reduction in the margin of revenue over expenditure, as have lately been witnessed may be met readily by raising additional revenue ought to be corrected by a; glance at the figures of taxation per head in pre-war and post-war years:— ■ Taxation Per Head. -Es. d. 1908 5 0 4 1911 510 0 1920 14 12 2 1921 (estimated) 15 7 6

The position here briefly outlined raises a plain necessity for prudent and careful administration and a rigorous avoidance of wasteful or unprofitable, expenditure. At tho same time there is no room for any suggestion that the .Dominion is crippled by undue financial obligations. As a matter of fact, its financial handicaps arc appreciably lighter than those imposed on some other countries. This is well brought out in the following comparison of annual charges per head for interest and .sinking fund, and annual taxation per head hero and in Great Britain: — 'Anuual Charge Per Head for Interest and Sinking Fund. . 1914. 11)19-20. X's. d. £ 6. d. Groat. Britain 10 li 7 10 0 New Zealand 2 12 0 G 3 G Annual Taxation Per Head. 1911 1919-20. ,E s. d. e. ilGreat Britain 3 15 G 24 0 0 New Zealand 5 10 0 14 12 2 As the Dominion is placed financially, the first essential is that the increase in expenditure from year to year should be adjusted in relation to revenue. In a country at a comparatively early stage of development there ought to be no question of unduly limiting expenditure which is calculated to stimulate and expand useful production. Wise spending is just as necessary as provident economy in order that the Dominion 'may surmount its present difficulties and give its people prosperity. Evidently, however, if serious trouble is to be avoided public- expenditure on development works must be carried out henceforth on such lines as will ensure a reasonably prompt and profitable return. With tho elimination of waste, a really rational pub-

lie works policy anil the enterprising encouragement of immigration take an all-important place amongst the measures that will enable the Dominion not only to meet its financial obligations, but to improvo upon its present prosperity.